The global economy has experienced much uncertainty in recent years, however 2014 is predicted to be much healthier. Both Michael and Nadim have witnessed this up-tick.
“We have definitely experienced an increase in activity through the first quarter of 2014,” says Michael. “Dubai has especially felt this surge in activity with the announcement in late 2013 of the city’s winning Expo 2020 bid. Although the World Expo is not an automatic revenue generating event, it will cater to Dubai’s ever growing service sector and its revitalized construction and real estate industries.”
Nadim adds: “We have also noticed a rise in conversations between companies seeking to find new ways of cooperation, whether through direct M&A or through other structures. The bringing together and pooling of resources, especially with large corporate players, is always a positive indicator for a burgeoning market and we expect this trend to continue throughout 2014.”
Both agree that the current attitude is one of optimism as the lifting of the shroud of gloom which has engulfed the economic climate in recent years. “There are a number of developments specific to the UAE that have spurned this rise in economic activity. In contrast with the somewhat stagnating emerging markets, the UAE and Dubai seems to be performing quite well. We have received a number of inquiries from our existing international clients who are seeking to expand their operations in the UAE and the region as well as from new clients who are eager to tap into the growth and potential that the UAE has to offer.”
“We usually see a pattern of steady growth in Q1 due to the start of the new year and a number of companies at the start of their fiscal year and thus at the peak of their spending cycle. This year, we have noticed that our clients are looking to secure more strategic long term investments through their activity than in previous years. The UAE remains one of the only jurisdictions in the Middle East which has not had to deal with any of the fallout from the “Arab Spring”. This has lead to an increased confidence in the jurisdiction as well as an influx of funds which may have previously been earmarked for other jurisdictions.”
Certain sectors, more than others, have experienced increased activity, especially compared with last year, as Michael explains: “We have primary seen activity in the insurance industry and the oil & gas sector. This has pretty much followed the trends that we have seen in the past year although we have also witnessed M&A activity across a wide range of sectors such as the service, construction and art industries.”
“The construction and real estate sectors have also had a very steep increase in activity in Q1 although this increase has been progressive since 2013,” adds Nadim. “The UAE is continuing to invest in its infrastructure with new airports and logistics centres being built in both Dubai and Abu Dhabi ensuring that trade and industry will continue to be active throughout 2014.”
Emerging trends have been noticed by both associates at Bin Shabib, most notably the redraft of Companies Law in the UAE.
“The UAE has long been discussing a redraft of the Companies Law,” they explain. “An initial draft was set out in Q1 of 2013 and it has been reported that the new federal law may be ratified as soon as the beginning of Q2 of 2014. The new framework is reported to facilitate the incorporation of new companies, increase transparency among corporate entities based in the UAE and encourage additional FDI in the country. There are reports that a law facilitating the setup of SME’s is also in the pipeline with an expected draft to be released in 2014.
“The above will contribute to creating a market with a regulatory framework that encourages M&A and provides for easier procedures and processes. Deal volume is usually linked to the maturity of a market and the UAE market is progressing towards the type of maturity that would encourage an increase in M&A activity.”
By all accounts, it seems that Q2 is going to continue long the same vein as Q1 for Bin Shabib & Associates. “We believe we will continue to see encouragement in DI in the UAE as the country continues its economic xpansion. Dubai in particular has announced several arge infrastructure projects which will create a large umber of jobs. Coupled with a rejuvenation of the real state market, with many large projects announced in
Q4 of 2013; Dubai is poised for more of the same in 2014.”
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|Title:||2014 Q1 Review – Sector spotlight on the current climate in Dubai|
|Practice:||Corporate and M&A|
|Authors:||Michael Kortbawi and Nadim Bardawil|